I don't think so; Both work well- for me it's a matter of expected volatility and price vs anticipated events. Longer expiration gives you more premium for fewer shares- so it can be a balance of how many shares you want to be potentially acquiring. I've done both though 3 month and 6month- they seem to work equally well for me. I haven't done a long dated Put though- just don't want to carry the margin that long I guess
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Newbie Options Trading
- Thread starter Jonathan Hewitt
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- investing options TSLA tsla stock
I don't think so; Both work well- for me it's a matter of expected volatility and price vs anticipated events. Longer expiration gives you more premium for fewer shares- so it can be a balance of how many shares you want to be potentially acquiring. I've done both though 3 month and 6month- they seem to work equally well for me. I haven't done a long dated Put though- just don't want to carry the margin that long I guess
I've decided to set up margin trading on my brokerage account and have been thinking of potential new strategies open to me. The one I was leaning the most towards goes as follows...I was thinking of keeping my JAN15 calls and my stock but selling all my JAN14 and sooner calls. All the money that I obtain from the selling I keep as cash. I then sell slightly out of the money puts.
-If the puts expire out of the money I keep the profit and still have some exposure with my stock and LEAPS if it goes up.
-If the puts expire in the money then I buy the stock with the cash I had sitting around doing nothing and now I'm the proud owner of TSLA stock "at a discount." (My long stock that I didn't sell acts as equity to avoid a margin call in case TSLA goes really down). I then hold onto the stock I just obtained until any possible paper losses go away or maybe even hold it long term depending on the situation (I believe in TSLA long term so don't mind holding onto the stock for a long time but may want to sell it so I can do this put selling process again).
I figure this is a less risky way to make some money than shorter term calls that may expire worthless or just buying stock outright as this method will get me the stock at a discount.
I know everything is going to change throughout this week but the example I was looking at was the SEP13 $95 Put. The bid was $12 at closing. I would therefore have to pay an effective $8300 to buy 100 shares at expiration after the premium is applied (I don't know about you but paying $83 a share right now sounds pretty good!). For every $8300 in cash in my account I could sell two of these puts (if I got putted the stock I would use margin to buy the second 100 shares). Best case scenario the puts expire worthless and I make $2400 in a 3 month span or even better I close out the contracts early if I can wring most of the profit out of them and then sell new puts. $2400/$8300=29% in 3 months, would be ~115% in a year if I could replicate that trade 4 times. At this point I would take that any day compared to calls that can expire worthless. Worst case scenario the stock plummets and I suffer large paper losses but as long as I don't overextend myself my long stock will help me avoid a margin call. I believe the stock would eventually recover so even though it would suck I would eventually recover and compared to buying stock long I would have suffered much larger paper losses in that case (I wouldn't have bought the stock at a discount if I went straight long). If I want to extend myself a lot I could do a bull put spread. I wouldn't make as much per spread as just selling a put but would be able to do additional contracts while keeping risk manageable. It would probably be smart to start out this way with just a couple contracts anyways or choose a more out of the money strike.
I would classify my new portfolio setup in this case as "slightly bullish" instead of "extremely bullish" which is how I feel right now. If I said anything that is just plain wrong or if anyone has any advice I'm all ears! Thanks in advance!!!
-If the puts expire out of the money I keep the profit and still have some exposure with my stock and LEAPS if it goes up.
-If the puts expire in the money then I buy the stock with the cash I had sitting around doing nothing and now I'm the proud owner of TSLA stock "at a discount." (My long stock that I didn't sell acts as equity to avoid a margin call in case TSLA goes really down). I then hold onto the stock I just obtained until any possible paper losses go away or maybe even hold it long term depending on the situation (I believe in TSLA long term so don't mind holding onto the stock for a long time but may want to sell it so I can do this put selling process again).
I figure this is a less risky way to make some money than shorter term calls that may expire worthless or just buying stock outright as this method will get me the stock at a discount.
I know everything is going to change throughout this week but the example I was looking at was the SEP13 $95 Put. The bid was $12 at closing. I would therefore have to pay an effective $8300 to buy 100 shares at expiration after the premium is applied (I don't know about you but paying $83 a share right now sounds pretty good!). For every $8300 in cash in my account I could sell two of these puts (if I got putted the stock I would use margin to buy the second 100 shares). Best case scenario the puts expire worthless and I make $2400 in a 3 month span or even better I close out the contracts early if I can wring most of the profit out of them and then sell new puts. $2400/$8300=29% in 3 months, would be ~115% in a year if I could replicate that trade 4 times. At this point I would take that any day compared to calls that can expire worthless. Worst case scenario the stock plummets and I suffer large paper losses but as long as I don't overextend myself my long stock will help me avoid a margin call. I believe the stock would eventually recover so even though it would suck I would eventually recover and compared to buying stock long I would have suffered much larger paper losses in that case (I wouldn't have bought the stock at a discount if I went straight long). If I want to extend myself a lot I could do a bull put spread. I wouldn't make as much per spread as just selling a put but would be able to do additional contracts while keeping risk manageable. It would probably be smart to start out this way with just a couple contracts anyways or choose a more out of the money strike.
I would classify my new portfolio setup in this case as "slightly bullish" instead of "extremely bullish" which is how I feel right now. If I said anything that is just plain wrong or if anyone has any advice I'm all ears! Thanks in advance!!!
Yep good plan from my perspective. Used that method with good results. Best time to sell the puts is on any sort of a dip of course and is also let's you use your cash to hold the put sell (or you can use margin for that, although my broker only allows 50% margin currently for TSLA). I like your plan in general and I'm executing similar currently. (I think we'll get a pullback after the news so holding for that- that could easily be wrong , but we are high valuation currently and I don't think the market will juice up significantly on battery swapping)
Great, thanks again for your help! Yeah, I think I'm going to do most or all of the selling of my shorter term calls Wednesday/Thursday time frame assuming some kind of runup this week and wait until Friday to see if I want to start selling puts or wait...
smorgasbord
Active Member
This sounds like something more for the "Advanced TSLA Options" thread, but anyway:
Since you're still slightly bullish on TSLA, don't sell any of your calls to buy puts. Roll them to higher strikes, and perhaps at later expirations. That means you'll pocket most of the profits you've now got, plus you'll still benefit if TSLA rises from here. Selling calls and buying Puts is the riskier strategy in my book. You end up being on the hook to buy TSLA if it drops below the strike price, and you were talking 3 months out for $95. If the stock drops to $75, you're still buying at $95. If you roll, you pocket profits now, you have the ability to profit on further up moves, and if the stock declines, well, you took profits now.
IMHO, anyway.
Maybe it does but I'm a newbie options trader so I put it in here
Thought I guess if I'm thinking of strategies like this I can get promoted to advanced options trading I thought of the rolling first as the only trades I have done so far is buying calls but the reason I was leaning against that was I'm only slightly bullish right now. I think I see most likely TSLA sideways trading over the next few months with some potential for another 20-30% gain and some potential for 20-30% loss. With the call premiums being what they are TSLA could go up and I wouldn't make much if any money because it wouldn't be enough of a rise to outweigh the premiums. I was thinking of selling my shorter term calls as guaranteed profit and then selling the puts as more guaranteed profit that would then only result in paper losses if TSLA downward trades instead of options which will eventually result in real losses if it goes down and stays down long enough. Yes, I would be stuck at buying TSLA at $95 but it would effectively be $83 once the premium was taken into account and no one is forcing me to sell until I feel like it. If TSLA goes down to $75 and I had rolled everything up then all the rolled up calls are going to go down a ton in value and I get to stress out hoping that TSLA goes back up enough in value before they expire worthless. LEAPS would most likely not have this issue but may take a long time to regain value and may not make any money considering the premiums.
Maybe I didn't explain my thought process well the first time, I am not looking at what you said right, or maybe the numbers aren't syncing in my head the right way. To summarize what I was trying to say was I thought maybe this new strategy for me could be a less stressful way to make some profits as I have faith in TSLA super long term but want to shy away from shorter term options for now and don't know if going 100% LEAPS is what I want to do either because of the premiums.
InTheShadows
Active Member
So I have activated my options account (TD Ameritrade) and want to start into this slowly. I want to fully understand everything before hand. My questions are on the margin side of things only.
If I buy more TSLA and my margin balance ends up being -$10k. When I sell the stock the first $10k that I sell repays the margin. No matter what the underlying stock does. (this is my understanding of it, please correct me if I'm wrong) So my question is, if I sell another stock that I didn't buy on margin would that sale go to pay back the margin first? So say I bought some TSLA on margin and I sell SCTY which was 100% my capital. Will the sale of the SCTY go towards repaying my margin balance?
Now what would happen if I had $0 cash balance and 0 SCTY but $20k available for trading and I wanted to buy SCTY, would I be able to do it since there is $0 cash?
Also if I wanted to de-leverage would the first $10k I deposit into my funds account go towards paying back the margin balance?
If I buy more TSLA and my margin balance ends up being -$10k. When I sell the stock the first $10k that I sell repays the margin. No matter what the underlying stock does. (this is my understanding of it, please correct me if I'm wrong) So my question is, if I sell another stock that I didn't buy on margin would that sale go to pay back the margin first? So say I bought some TSLA on margin and I sell SCTY which was 100% my capital. Will the sale of the SCTY go towards repaying my margin balance?
Now what would happen if I had $0 cash balance and 0 SCTY but $20k available for trading and I wanted to buy SCTY, would I be able to do it since there is $0 cash?
Also if I wanted to de-leverage would the first $10k I deposit into my funds account go towards paying back the margin balance?
To the degree TD Ameritrade isn't doing something unusual or different (and they have the right to do that woith disclosure on your account):
Any sale to cash will first pay down any margin (to lower carry interest on the account as it stands at that trade)- But that will take 3 days of trade settle to apply;
But Since that margin becomes available again, it can be used to buy something else (like SCTY in your example). The $0 cash would continue to show for the 3 days to settle the sold security, allowing it's proceed to apply to margin- however, most brokerages (and again I assume Ameritrade) allow use of the (future)margin during the 3 days.
(All of this excludes the concept of Day-Trading power of course)
Any sale to cash will first pay down any margin (to lower carry interest on the account as it stands at that trade)- But that will take 3 days of trade settle to apply;
But Since that margin becomes available again, it can be used to buy something else (like SCTY in your example). The $0 cash would continue to show for the 3 days to settle the sold security, allowing it's proceed to apply to margin- however, most brokerages (and again I assume Ameritrade) allow use of the (future)margin during the 3 days.
(All of this excludes the concept of Day-Trading power of course)
I'm normally not inclined to be a day trader, but I think the much-hyped demonstration tonight provides an opportunity. I bought some June 22 100 and 105 calls on the theory that I will have two possibilities of making money. We could get a run-up in the last hour of trading today and I'll just pocket some profit or the demonstration tonight might actually live up to the hype and the stock jumps tomorrow. I'm not betting the farm, but it seems like a reasonable risk.
This is not a day to be long. Everything is getting pulled down, including TSLA. Sit tight, you'll get another buying opportunity.
So much for plan A - the finishing run up was way too little, too late. We'll see what tonight and tomorrow bring. I have been waiting for a good buying opportunity for some LEAPs, so it's not all bad news if the stock gets a good trimming.
Same here. I'm willing to gamble a few hundred on the announcement, but given the way the announcements sometimes go, I bought some Jun 22 100 Puts as well.
It looks like you chose wisely with those 100 puts. I sold my 100 calls for a slight profit soon after the open, though I am obviously quite out of luck with my 105s.
They definitely did help out. I managed to offload them early in the day when it dipped to just above $98 for a good return, but alas, it was not enough to save my calls. Took a small hit overall. Kind of surprised at a relatively uninteresting day for TSLA.
InTheShadows
Active Member
Does anybody have a good resource for learning the basics of options trading? I set up a paper money account to I can learn options risk free. I'd like to find a good training plan for starting out.
I found this to be relatively helpful for beginners.
http://www.theoptionsguide.com/
Spent some time on Khan Academy as well.
https://www.khanacademy.org/
and I found this tool to be helpful too, especially since you can plug in some of the more advanced strategies and see where the risk/profit lands.
http://www.optionsprofitcalculator.com/
http://www.theoptionsguide.com/
Spent some time on Khan Academy as well.
https://www.khanacademy.org/
and I found this tool to be helpful too, especially since you can plug in some of the more advanced strategies and see where the risk/profit lands.
http://www.optionsprofitcalculator.com/
Nice!! I didn't know they had option trading on there!
I second this. It's $21 and I read the parts I needed in 1 night and feel confident in my options. Before that I was just buying options not knowing anything about them really (so I realize in hindsight)
Ah. I hate to say this, and you should feel free to ignore me, but paper money doesn't work. The problem is that you don't care about the paper. So your intellect takes over, and maybe you do fantastically well (on paper). So you think you'll make lots of money! Yay! Then you put real money on the table, and worry about whether it should have paid down your student loan or your mortgage or your kids' braces or your grocery bill, and suddenly it isn't intellect, it's hormones. We're just bags of hormones. The next thing is that something your intellect says "sell", your emotions say "The price is down, and I really believe in Mr. Fusion, so I'll buy some more!"
You need to experience the pain and emotion, even if only a little bit. Decide what is "real money" for you. If it's less than $1k, go away, come back later, commissions will eat you alive. If you can get in the game, meticulously document every decision you make so you can come back and learn from them. I've been trading about 15 years, and done pretty well. A couple of months ago I made a $100k mistake. Boy, did I learn from that one! I know exactly what I did wrong, but because it really hurt, I really really won't do it again. With paper money, I could have just said "but the other trades did OK..."
+1 I concur with everything that ggr said. The only thing that paper money is good for is to get a feel of how time value of the option works. Buy some options today and see how they go down in value over the next few days/weeks due to time value. Other than that you have to play with real money.
I treat my real money investments like monopoly money lol. That is why I have been successful so far. I also know that it may be my undoing and I will live with the consequences.
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